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Macroeconomic Volatility and its Significance to the Rising External Indebtedness of Nigeria

Yıl 2021, , 1 - 17, 18.10.2021
https://doi.org/10.26650/mcd2021-937042

Öz

The motivation of this study has been to identify the effects of the multidimensional perspectives of macroeconomic volatility on the growth of external debt in Nigeria from 1970 to 2018. Methodologically, the Auto-Regressive Distributed Lag (ARDL) model and the Toda-Yamamoto causality approach were adopted. For the purpose of understanding the multidimensional perspective of macroeconomic volatility, macroeconomic volatility was disaggregated into three different perspectives which are: volatility from macroeconomic outcomes, domestic sources, and external sources. Findings from the study suggest that while volatility from macroeconomic outcomes exclusively affects external debt in the long-term, effects from the three sources were very substantial in the short-term. Furthermore, the causality result indicates bidirectional nexus between volatility from macroeconomic outcomes and external debt. Also, the irregular variations in the Nigerian political space, unanticipated disease outbreaks, and the effects of the 1986 recession in the country all significantly worsened the country’s external debt situation. Thus, the study recommended amongst others that since developing countries such as Nigeria cannot do away with the demand for external debt to finance its economic growth, it is also important to count the cost such financing provides even if faster growth is actually realise.

Kaynakça

  • Abdullahi, M. M., Abu Bakar, N. A., and Hassan, S. B. (2015). Determining the Macroeconomic Factors of External Debt Accumulation in Nigeria: An ARDL bound approach. Procedia-Social and Behavioural Sciences. Vol.211, pp.745-752. google scholar
  • Adamu, I., and Rasiah, R. (2016). On the Determinants of External Debt in Nigeria. Available at: https://ssrn.com/ abstract=2865568 and accessed on 19/04/2020. google scholar
  • Ajayi, S. I. (1991). Macroeconomic Approach to External Debt: The Case of Nigeria. AERC Research Paper Eight. Initiative Publishers, Nairobi google scholar
  • Ajayi, S. I, and Khan, M. S. (Eds.). (2000). External debt and capital flight in sub-Saharan Africa. International Monetary Fund, Washington, D. C. google scholar
  • Aladejare, S. A. (2018). Resource Price, Macroeconomic Distortions, and Public Outlay: Evidence from Oil-Exporting Countries. International Economic Journal. Vol. 32(2), pp. 199-218. google scholar
  • Aladejare, S. A. (2019). Testing the Robustness of Public Spending Determinants on Public Spending Decisions in Nigeria. International Economic Journal, Vol. 33(1), pp. 65-87. google scholar
  • Aladejare, S. A. (2020). Macroeconomic Vs. Resource Determinants of Economic Growth in Africa: A COMESA and ECOWAS Study. International Economic Journal. Vol.34(1), pp.100-124. google scholar
  • British Petroleum statistical review of world energy (2018). google scholar
  • BudgIT (2019a). Nigeria’s Petrol Subsidy Regime: Dilemma of the world’s most populous black nation (Policy brief). Available at https://yourbudgit.com/ accessed on 15/02/2020. google scholar
  • BudgIT (2019b). Reviewing Nigeria’s Debt Status (Policy brief). Available at https://yourbudgit.com/ accessed on 25/04/2020. google scholar
  • Bulow, J., and Rogoff, K. (1989). Sovereign Debt: Is to Forgive to Forget? American Economic Review. Vol.79, pp.43-50. google scholar
  • Catao, L., and Kapir, S. (2004). Missing Link: Volatility and the Debt Intolerance Paradox. International Monetary Fund Working Paper WP/04/051, pp.1-35. Washington D.C. google scholar
  • Catao, L., and Sutton, B. (2002). Sovereign Defaults: The Role of Volatility. International Monetary Fund Working Paper WP/02/149, pp.1-28. Washington D.C. google scholar
  • Central Bank of Nigeria (2009). Annual Statistical Bulletin. google scholar
  • Central Bank of Nigeria (2018). Annual Statistical Bulletin. google scholar
  • Chari, V. V., and Kehoe, P. (1993). Sustainable Plans and Debt. Journal of Economic Theory. Vol.61, pp.230-261. google scholar
  • Debt Management Office (2005). Nigeria’s Debt Relief Deal with the Paris Club. Abuja: DMO. google scholar
  • Eaton, J. (1993). Sovereign Debt: A Primer. The World Bank Economic Review. Vol.7, pp.137-172. google scholar
  • Eaton, J., and Gersovitz, M. (1981). Debt with Potential Repudiation: Theoretical and Empirical Analysis. Review of Economic Studies. Vol.48, pp.289-309. google scholar
  • Edo, S. E. (2002). The External Debt Problem in Africa: A Comparative Study of Nigeria and Morocco. African Development Review. Vol.14(2), pp.221-236. google scholar
  • Elom-Obed, O. F., Odo, S. I., Elom-Obed, O., and Charity, I. A. (2017). Public Dbet and Economic Growth in Nigeria. Asian Research Journal of Arts and Social Sciences. Vol.4(3), pp.1-17. google scholar
  • Essien, S. N., Agboegbulem, N. T., Mba, M. K., and Onumonu, O. G. (2016). An Empirical Analysis of the Macroeconomic Impact of Public Debt in Nigeria. CBN Journal of Applied Statistics. Vol.7(1a), pp.125-145. google scholar
  • Eyiuche, A. C. (2000). Evaluation of the relationship between deficit financing and fiscal operation in Nigeria. African Banking & Finance Review, Vol. 1(1): pp. 65-73. google scholar
  • Festus, G. E., and Saibu, M. O. (2019). Effect of External Debt on the Nigerian Economy: Further Evidences. Available at https://mpra.ub.uni-muenchen.de/92704/MPRA Paper No. 92704 google scholar
  • Fuller, W. A. (1976). Introduction to Statistical Time Series. New York: John Wiley and Sons. ISBN 0-471-28715-6. google scholar
  • Genberg, H. and Sulstarova, A. (2004). Macroeconomic Volatility, Debt Dynamics, and Sovereign Interest Rate Spreads. HEI Working Paper, No: 03/2004. Graduate Institute of International Studies, Geneva. google scholar
  • Goyal, A., Sengupta, R., and Verma, A. (2019). External Debt Financing and Macroeconomic Instability in Emerging Market Economies. Indira Gandhi Institute of Development Research. Working Paper No.2019-013, pp.1-38, Mumbai. google scholar
  • Greenidge, K., Drakes, L., and Craigwell, R. (2010). The External Public Debt in the Caribbean Community. Journal of Policy Modelling. Vol.32, pp.418-431. google scholar
  • Grossman, H., and Van Huyck, J. (1988). Sovereign Debt as a Contingent Claim: Excusable Default, Repudiation and Reputation. American Economic Review. Vol.78, pp.1088-1097. google scholar
  • Iyoha, M. (2000). An econometric analysis of external debt and economic growth. In S. Ajayi, and M. Khan (Eds.), External debt and capital flight in sub-Saharan Africa (pp. 160-209). Washington, DC: International Monetary Fund. google scholar
  • Jibir, A., Abdullahi, S., Abdu, M., Buba, A. and Ibrahim, B. (2017). External Debt-Growth Nexus in Nigeria Revisited. Asian Economic and Financial Review. Vol.8(1), pp.117-130. google scholar
  • Korinek, A. (2011). Foreign Currency Debt, Risk Premia and Macroeconomic Volatility. European Economic Review. Vol.55(3), pp.371-385. google scholar
  • Lawanson, A. O. (2007). An Econometric Analysis of Capital Flight from Nigeria: A Portfolio Approach. AERC Research paper 166, pp.1-36. Nairobi. google scholar
  • Leung, H. (2003). External Debt and Worsening Business Cycles in Less Developed Countries. Journal ofEconomic Studies. Vol.30(2), pp.155-168. google scholar
  • Loayza, N. V., Ranciere, R., Serven, L., and Ventura, J. (2007). Macroeconomic Volatility and Welfare in Developing Countries: An Introduction. The World Bank Economic Review, Vol. 21(3), pp. 343-357. google scholar
  • Merola, R. (2012). Debt and Macroeconomic Stability: Case studies. Organization for Economic Cooperation and Development (OECD) Economics Department Working Papers, No. 1004, pp.1-36, OECD Publishing, Paris. google scholar
  • Ndikumana, L., and Boyce, J. (2011). Capital Flight from Sub-Saharan Africa: Linkages with External Borrowing and Policy Options. International Review ofApplied Economics. Vol.25(2), pp.149-170. google scholar
  • Ogbonna, K. S., Ibenta, S. N., Chris-Ejiogu, U. G., and Atsanan, A. N. (2019). European Academic Research. Vol. VI(10), PP.5714-5740. google scholar
  • Ogbuigwe, A. (2018). Refining in Nigeria: History, Challenges and Prospects. Applied Petrochemical Research. Vol.8, pp.181-192. google scholar
  • Ogunyemi, A. O. (2011). Rethinking the Origin of Nigeria’s Debt Burden: A Historical Reconstruction. Journal of the Historical Society ofNigeria. Vol.20, pp.26-44. google scholar
  • Okoye, L. U., Modebe, N. J., Erin, O. A., and Evbuomwan, G. O. (2017). Effect of External Debt on Economic Growth: Evidence from Nigeria. Available at: eprints.convenantuniversity.edu.ng accessed on 19/04/2020. google scholar
  • Pesaran M. H., Shin, Y., and Smith, R. J. (2001). Bounds Testing Approaches to the Analysis of Level Relationship. Journal ofApplied Econometrics, Vol. (16), pp. 289-326. google scholar
  • Phillips, P. C., Perron, P. (1988). Testing for a Unit Root in Time Series Regression. Biometrika. Vol. 75(2), pp. 335-346. google scholar
  • Sami, A., and Mbah, S. A. (2018). External Debt and Economic Growth: The Case of Emerging Economy. Journal ofEconomic Integration. Vol.33(1), pp.1141-1157. google scholar
  • Sutherland, D., Hoeller, P., Merola, R., and Ziemann, V. (2012). Debt and Macroeconomic Stability. Organization for Economic Cooperation and Development (OECD) Economics Department Working Papers No. 1003, pp.1-37. OECD Publishing, Paris. google scholar
  • Toda, H.Y., and Yamamoto, T. (1995). Statistical Inference in Vector Autoregressive with Possibly Integrated Processes. Journal ofEconometrics. Vol.66 (1), pp.225-250. google scholar
  • World Bank (2019) World Development Indicator. google scholar
  • World Bank. (2000). Securing Our Future in a Global Economy. Washington, D.C. google scholar
  • Worrall, T. (1990). Debt with Potential Repudiation. European Economic Review. Vol.34, pp.1099-1109. google scholar

Macroeconomic Volatility and its Significance to the Rising External Indebtedness of Nigeria

Yıl 2021, , 1 - 17, 18.10.2021
https://doi.org/10.26650/mcd2021-937042

Öz

The motivation of this study has been to identify the effects of the multidimensional perspectives of macroeconomic volatility on the growth of external debt in Nigeria from 1970 to 2018. Methodologically, the Auto-Regressive Distributed Lag (ARDL) model and the Toda-Yamamoto causality approach were adopted. For the purpose of understanding the multidimensional perspective of macroeconomic volatility, macroeconomic volatility was disaggregated into three different perspectives which are: volatility from macroeconomic outcomes, domestic sources, and external sources. Findings from the study suggest that while volatility from macroeconomic outcomes exclusively affects external debt in the long-term, effects from the three sources were very substantial in the short-term. Furthermore, the causality result indicates bidirectional nexus between volatility from macroeconomic outcomes and external debt. Also, the irregular variations in the Nigerian political space, unanticipated disease outbreaks, and the effects of the 1986 recession in the country all significantly worsened the country’s external debt situation. Thus, the study recommended amongst others that since developing countries such as Nigeria cannot do away with the demand for external debt to finance its economic growth, it is also important to count the cost such financing provides even if faster growth is actually realise.

Kaynakça

  • Abdullahi, M. M., Abu Bakar, N. A., and Hassan, S. B. (2015). Determining the Macroeconomic Factors of External Debt Accumulation in Nigeria: An ARDL bound approach. Procedia-Social and Behavioural Sciences. Vol.211, pp.745-752. google scholar
  • Adamu, I., and Rasiah, R. (2016). On the Determinants of External Debt in Nigeria. Available at: https://ssrn.com/ abstract=2865568 and accessed on 19/04/2020. google scholar
  • Ajayi, S. I. (1991). Macroeconomic Approach to External Debt: The Case of Nigeria. AERC Research Paper Eight. Initiative Publishers, Nairobi google scholar
  • Ajayi, S. I, and Khan, M. S. (Eds.). (2000). External debt and capital flight in sub-Saharan Africa. International Monetary Fund, Washington, D. C. google scholar
  • Aladejare, S. A. (2018). Resource Price, Macroeconomic Distortions, and Public Outlay: Evidence from Oil-Exporting Countries. International Economic Journal. Vol. 32(2), pp. 199-218. google scholar
  • Aladejare, S. A. (2019). Testing the Robustness of Public Spending Determinants on Public Spending Decisions in Nigeria. International Economic Journal, Vol. 33(1), pp. 65-87. google scholar
  • Aladejare, S. A. (2020). Macroeconomic Vs. Resource Determinants of Economic Growth in Africa: A COMESA and ECOWAS Study. International Economic Journal. Vol.34(1), pp.100-124. google scholar
  • British Petroleum statistical review of world energy (2018). google scholar
  • BudgIT (2019a). Nigeria’s Petrol Subsidy Regime: Dilemma of the world’s most populous black nation (Policy brief). Available at https://yourbudgit.com/ accessed on 15/02/2020. google scholar
  • BudgIT (2019b). Reviewing Nigeria’s Debt Status (Policy brief). Available at https://yourbudgit.com/ accessed on 25/04/2020. google scholar
  • Bulow, J., and Rogoff, K. (1989). Sovereign Debt: Is to Forgive to Forget? American Economic Review. Vol.79, pp.43-50. google scholar
  • Catao, L., and Kapir, S. (2004). Missing Link: Volatility and the Debt Intolerance Paradox. International Monetary Fund Working Paper WP/04/051, pp.1-35. Washington D.C. google scholar
  • Catao, L., and Sutton, B. (2002). Sovereign Defaults: The Role of Volatility. International Monetary Fund Working Paper WP/02/149, pp.1-28. Washington D.C. google scholar
  • Central Bank of Nigeria (2009). Annual Statistical Bulletin. google scholar
  • Central Bank of Nigeria (2018). Annual Statistical Bulletin. google scholar
  • Chari, V. V., and Kehoe, P. (1993). Sustainable Plans and Debt. Journal of Economic Theory. Vol.61, pp.230-261. google scholar
  • Debt Management Office (2005). Nigeria’s Debt Relief Deal with the Paris Club. Abuja: DMO. google scholar
  • Eaton, J. (1993). Sovereign Debt: A Primer. The World Bank Economic Review. Vol.7, pp.137-172. google scholar
  • Eaton, J., and Gersovitz, M. (1981). Debt with Potential Repudiation: Theoretical and Empirical Analysis. Review of Economic Studies. Vol.48, pp.289-309. google scholar
  • Edo, S. E. (2002). The External Debt Problem in Africa: A Comparative Study of Nigeria and Morocco. African Development Review. Vol.14(2), pp.221-236. google scholar
  • Elom-Obed, O. F., Odo, S. I., Elom-Obed, O., and Charity, I. A. (2017). Public Dbet and Economic Growth in Nigeria. Asian Research Journal of Arts and Social Sciences. Vol.4(3), pp.1-17. google scholar
  • Essien, S. N., Agboegbulem, N. T., Mba, M. K., and Onumonu, O. G. (2016). An Empirical Analysis of the Macroeconomic Impact of Public Debt in Nigeria. CBN Journal of Applied Statistics. Vol.7(1a), pp.125-145. google scholar
  • Eyiuche, A. C. (2000). Evaluation of the relationship between deficit financing and fiscal operation in Nigeria. African Banking & Finance Review, Vol. 1(1): pp. 65-73. google scholar
  • Festus, G. E., and Saibu, M. O. (2019). Effect of External Debt on the Nigerian Economy: Further Evidences. Available at https://mpra.ub.uni-muenchen.de/92704/MPRA Paper No. 92704 google scholar
  • Fuller, W. A. (1976). Introduction to Statistical Time Series. New York: John Wiley and Sons. ISBN 0-471-28715-6. google scholar
  • Genberg, H. and Sulstarova, A. (2004). Macroeconomic Volatility, Debt Dynamics, and Sovereign Interest Rate Spreads. HEI Working Paper, No: 03/2004. Graduate Institute of International Studies, Geneva. google scholar
  • Goyal, A., Sengupta, R., and Verma, A. (2019). External Debt Financing and Macroeconomic Instability in Emerging Market Economies. Indira Gandhi Institute of Development Research. Working Paper No.2019-013, pp.1-38, Mumbai. google scholar
  • Greenidge, K., Drakes, L., and Craigwell, R. (2010). The External Public Debt in the Caribbean Community. Journal of Policy Modelling. Vol.32, pp.418-431. google scholar
  • Grossman, H., and Van Huyck, J. (1988). Sovereign Debt as a Contingent Claim: Excusable Default, Repudiation and Reputation. American Economic Review. Vol.78, pp.1088-1097. google scholar
  • Iyoha, M. (2000). An econometric analysis of external debt and economic growth. In S. Ajayi, and M. Khan (Eds.), External debt and capital flight in sub-Saharan Africa (pp. 160-209). Washington, DC: International Monetary Fund. google scholar
  • Jibir, A., Abdullahi, S., Abdu, M., Buba, A. and Ibrahim, B. (2017). External Debt-Growth Nexus in Nigeria Revisited. Asian Economic and Financial Review. Vol.8(1), pp.117-130. google scholar
  • Korinek, A. (2011). Foreign Currency Debt, Risk Premia and Macroeconomic Volatility. European Economic Review. Vol.55(3), pp.371-385. google scholar
  • Lawanson, A. O. (2007). An Econometric Analysis of Capital Flight from Nigeria: A Portfolio Approach. AERC Research paper 166, pp.1-36. Nairobi. google scholar
  • Leung, H. (2003). External Debt and Worsening Business Cycles in Less Developed Countries. Journal ofEconomic Studies. Vol.30(2), pp.155-168. google scholar
  • Loayza, N. V., Ranciere, R., Serven, L., and Ventura, J. (2007). Macroeconomic Volatility and Welfare in Developing Countries: An Introduction. The World Bank Economic Review, Vol. 21(3), pp. 343-357. google scholar
  • Merola, R. (2012). Debt and Macroeconomic Stability: Case studies. Organization for Economic Cooperation and Development (OECD) Economics Department Working Papers, No. 1004, pp.1-36, OECD Publishing, Paris. google scholar
  • Ndikumana, L., and Boyce, J. (2011). Capital Flight from Sub-Saharan Africa: Linkages with External Borrowing and Policy Options. International Review ofApplied Economics. Vol.25(2), pp.149-170. google scholar
  • Ogbonna, K. S., Ibenta, S. N., Chris-Ejiogu, U. G., and Atsanan, A. N. (2019). European Academic Research. Vol. VI(10), PP.5714-5740. google scholar
  • Ogbuigwe, A. (2018). Refining in Nigeria: History, Challenges and Prospects. Applied Petrochemical Research. Vol.8, pp.181-192. google scholar
  • Ogunyemi, A. O. (2011). Rethinking the Origin of Nigeria’s Debt Burden: A Historical Reconstruction. Journal of the Historical Society ofNigeria. Vol.20, pp.26-44. google scholar
  • Okoye, L. U., Modebe, N. J., Erin, O. A., and Evbuomwan, G. O. (2017). Effect of External Debt on Economic Growth: Evidence from Nigeria. Available at: eprints.convenantuniversity.edu.ng accessed on 19/04/2020. google scholar
  • Pesaran M. H., Shin, Y., and Smith, R. J. (2001). Bounds Testing Approaches to the Analysis of Level Relationship. Journal ofApplied Econometrics, Vol. (16), pp. 289-326. google scholar
  • Phillips, P. C., Perron, P. (1988). Testing for a Unit Root in Time Series Regression. Biometrika. Vol. 75(2), pp. 335-346. google scholar
  • Sami, A., and Mbah, S. A. (2018). External Debt and Economic Growth: The Case of Emerging Economy. Journal ofEconomic Integration. Vol.33(1), pp.1141-1157. google scholar
  • Sutherland, D., Hoeller, P., Merola, R., and Ziemann, V. (2012). Debt and Macroeconomic Stability. Organization for Economic Cooperation and Development (OECD) Economics Department Working Papers No. 1003, pp.1-37. OECD Publishing, Paris. google scholar
  • Toda, H.Y., and Yamamoto, T. (1995). Statistical Inference in Vector Autoregressive with Possibly Integrated Processes. Journal ofEconometrics. Vol.66 (1), pp.225-250. google scholar
  • World Bank (2019) World Development Indicator. google scholar
  • World Bank. (2000). Securing Our Future in a Global Economy. Washington, D.C. google scholar
  • Worrall, T. (1990). Debt with Potential Repudiation. European Economic Review. Vol.34, pp.1099-1109. google scholar
Toplam 49 adet kaynakça vardır.

Ayrıntılar

Birincil Dil İngilizce
Konular Ekonomi
Bölüm Araştırma Makalesi
Yazarlar

Samson Aladejare 0000-0002-2464-026X

Yayımlanma Tarihi 18 Ekim 2021
Gönderilme Tarihi 13 Mayıs 2021
Yayımlandığı Sayı Yıl 2021

Kaynak Göster

APA Aladejare, S. (2021). Macroeconomic Volatility and its Significance to the Rising External Indebtedness of Nigeria. Maliye Çalışmaları Dergisi(66), 1-17. https://doi.org/10.26650/mcd2021-937042